The Two Main Routes to Hiring in India
When a foreign company decides to hire talent in India, it faces a fundamental choice: set up its own legal entity (a subsidiary) or use an Employer of Record (EOR) to hire on its behalf. Both approaches are legitimate and widely used — but they suit very different business situations.
This guide breaks down the key differences to help you make the right decision for your India expansion.
What is an EOR?
An Employer of Record is a third-party company that legally employs workers on your behalf in India. The EOR handles all employment contracts, payroll, statutory compliance, and HR administration. You retain full control over the employee's day-to-day work and deliverables.
What is a Subsidiary?
A subsidiary is a separate legal entity incorporated in India — typically a Private Limited Company (Pvt Ltd) — that is owned wholly or partially by your foreign parent company. The subsidiary directly employs workers and operates as an independent Indian company.
Side-by-Side Comparison
| Factor | EOR | Subsidiary |
|---|---|---|
| Setup Time | 5–10 business days | 3–6 months |
| Setup Cost | Minimal (no incorporation) | ₹1–3 lakh + legal fees |
| Ongoing Cost | Per-employee monthly fee | Fixed overhead + compliance costs |
| Compliance Burden | Handled by EOR | Fully on you |
| PE Risk | Low (EOR is the employer) | None (you are the entity) |
| Brand Presence | Limited (EOR is employer of record) | Full (your own Indian company) |
| Scalability | Highly flexible | Requires more admin to scale |
| Wind-Down | Simple (end the contract) | Complex (MCA strike-off process) |
| IP Ownership | Requires careful contract drafting | Clear (owned by subsidiary) |
| Best For | 1–30 employees, testing market | 30+ employees, long-term presence |
Cost Analysis
EOR Costs
- EOR service fee: typically 8–15% of employee CTC or a flat monthly fee
- No incorporation costs
- No statutory registration fees
- No annual compliance filing costs
- Predictable, per-employee pricing
Subsidiary Costs
- Incorporation: ₹50,000–₹1,50,000 (legal + MCA fees)
- Registered office: ₹30,000–₹1,00,000/year
- Annual ROC filings: ₹20,000–₹50,000/year
- Statutory audit: ₹50,000–₹2,00,000/year
- HR/payroll team or outsourced payroll: ₹30,000–₹1,00,000/month
- Transfer pricing documentation (if applicable): ₹1,00,000+/year
For a team of 5 employees, an EOR is almost always more cost-effective than a subsidiary. The break-even point is typically around 25–35 employees, depending on the EOR fee structure.
Timeline Comparison
EOR: Hire in Days
- Day 1–2: Sign EOR agreement, share employee details
- Day 3–4: Employment contract drafted and signed
- Day 5–7: Employee onboarded, payroll set up
Subsidiary: Months of Setup
- Week 1–2: DSC, DIN, name approval
- Week 3–6: MOA/AOA drafting, MCA incorporation
- Week 7–10: PAN, TAN, GST, bank account
- Week 11–16: EPF, ESI, PT, Shops Act registration
- Week 17+: First hire possible
When to Choose EOR
- You need to hire quickly (within weeks, not months)
- You're hiring fewer than 25 employees
- You're testing the India market before committing
- You want to avoid the complexity of Indian corporate compliance
- Your India team is primarily remote/distributed
When to Choose a Subsidiary
- You're planning a large, long-term India operation (50+ employees)
- You need a local brand identity and client-facing presence
- You want to bid on Indian government contracts
- You need to hold Indian assets, IP, or real estate
- Your industry requires a local entity (e.g., banking, insurance, defence)
The Hybrid Approach
Many companies start with an EOR to hire their first employees quickly, then transition to a subsidiary once they've validated their India strategy and headcount justifies the investment. LawSync supports both models and can help you transition seamlessly when the time is right.
Conclusion
There's no one-size-fits-all answer. The right choice depends on your headcount, timeline, budget, and long-term India ambitions. If you're unsure, our India expansion specialists can help you model the costs and make the right call.
Book a free consultation with LawSync today.